Does the crude oil price influence the exchange rates of oil-importing and oil-exporting countries differently ? A wavelet coherence analysis

Lu Yang, Xiao Jing Cai, Shigeyuki Hamori

Research output: Contribution to journalArticlepeer-review

60 Citations (Scopus)

Abstract

We contribute to the literature on the co-movement between the crude oil price and the exchange rate markets by studying their dynamics in the time and frequency domain. Employing the wavelet coherence framework, we find that the degree of co-movement between the crude oil price and the exchange rates deviates over time. Additionally, we find strong but not homogenous links around the year 2008 for all the countries included in the study and from 2005 onwards for the oil-exporting countries. However, the strong interdependence area is limited for the oil-importing countries. Moreover, we observe a negative relationship between the returns of the crude oil price and the exchange rates for the oil-exporting countries, while the relationships for the oil-importing countries are uncertain. Our results present new and interesting implications for investors and policy makers.

Original languageEnglish
Pages (from-to)536-547
Number of pages12
JournalInternational Review of Economics and Finance
Volume49
DOIs
Publication statusPublished - May 1 2017
Externally publishedYes

Keywords

  • Co-movement
  • Exchange rate
  • Oil price
  • Wavelet coherence analysis

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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